Editor | On 25, Jan 2010

Jack Hipple

Many of you may have seen Google’s earnings report announced on Friday, January 22. In the 4th quarter of 2009, their sales (just one quarter!) were $6.7 BILLION and profits of $2 BILLION. This was 5 times the profit of the previous quarter. Let’s think about this a second. How would you like to make 30% profit on this large a sales volume without MAKING anything that you can touch and feel. Just information!!

Companies like Intel and Exxon spend over a billion dollars in capital just to build a state of the art chip factory or petrochemical plant. Now Google has offices and spends a lot of money air-conditioning the building that hold all its servers, but this is a fraction of what is required in traditional manufacturing of cars, steel, chemicals, and semi-conductors. And none of these industries make 30% on sales. In a very good year, they might make 15-20% return on their capital investment (not sales and maybe a 30% return on sales on a few real specialty products for which patents haven’t expired). These plants have to be constantly maintained, updated for constantly changing environmental and safety regulations, and plans for ultimate disposal of the property and equipment.

Wouldn’t it be a lot more fun just to collect and sell information? Isn’t that a lot easier? Well, of course it’s easier if that’s all the further your thought process goes. If it was that easy, everyone would do it. Despite the challenges of Microsoft and Yahoo, Google is still number one and is stretching its business vision beyond web searches. This tell us that information, itself, it pretty cheap and a commodity. It’s all around us. But to sift through it, analyze it, and get only what you want is the real challenge.

Information is a critical resource. We know this but not everyone recognizes this. Sometimes it’s egos that get in the way–we don’t collect information that might be bad news or we “spin” it (now don’t get huffy here, but consider the last several elections where the results (“information” as well as votes) are trying to tell the politicians something and possibly not just that “they don’t get it”).

I’ll bet that many of you collect tons of information in your process control computers and your customer interviews. What do you do with it? Store it? Or analyze it? How? Do you recognize all the informational resources around you? When was the last time you asked one of your employees their opinion about something vs. telling them to be a “team player”? Have you ever asked your folks what skill or talent they have that you are not taking advantage of? Have you ever asked them about what they observed on the midnight shift? What they saw on the last customer visit that wasn’t on the agenda or meeting plan? Have you considered what else you might do with the information that’s already out there?

Let’s consider a very recent example to illustrate these points. If you are a public agency responsible for traffic control and emergency medical repsonse to a traffic accident, how have you managed this for decades? You sit in readiness and wait for someone to call in an accident. Then you respond appropriately. This takes a certain amount of time. What if you could shorten that time? Clear the road quicker? Possibly save someone’s life because you responded quicker with an ambulance? What information is at your disposal that could accelerate your response? Before I tell you the answer, think about this for a few seconds without reading further…….

What do people do today (that they didn’t do 5-10 years ago) when a situation like this happens? Don’t they get out their cell phones and call someone? Maybe it’s their kids–“I’ll be late to pick you up”. Maybe it’s a colleague with whom a meeting is scheduled. “I’ll be a little bit late”. Maybe it’s picking up someone from work. “Don’t worry, nothing happened, just stuck in a traffic jam–not sure what’s going on”. Everyone who does this generates an electromagnetic signal that is going to a cell phone tower. The dramatic rise in the level of cell phone calls is a resource and it is measurable. So if there is a sudden increase in cell phone calls, there’s an accident! I know where to go because there calls are triangulated by geography and the signals now tell me where to go, almost instantly. Air Sage is doing this and selling the service.

I also recall a talk some time ago by someone from McNeil Pharmaceuticals about their putting cameras in the homes of people who were using their OTC medications (Tylenol(R) for children for example) to observe what customers actually did with their medicines, not what a consumer panel said they did. This allowed them to re-think packaging, dosing instructions, etc. The information was there all along, but no one bothered to make the extra effort to collect it. (It’s a lot easier to just send surveys out, isn’t it?).

Think about how football strategy has changed now that someone up in a booth, being able to see the whole playing field, can wirelessly communicate to the coach and tell him what the opposition did that he couldn’t see from his ground position. What else is possible to do with this new resource of cell phone signals? Norwich Union Insurance is using this information to know when a car is on the road vs. in the garage. Why pay for accident insurance if the car is in the garage? How about monitoring how fast your teenager is driving? (This now combines cell phone signals with the “new” resource of GPS satellites).

What are the lessons here? First, information is an important resource. Second, it is easy to get overloaded. Thirdly, analyzing and sifting through information is what is critical. Fourth, new informational resources appear frequently (the cell phone example would not have been there 20 years ago), so it’s good that we take re-inventory resources and ask how this new resource could be used. Last, and most important, ask those around you what they see and observe. Ask yourself if the information you have is really direct information or indirect. Information and its analysis can be the difference between success and failure in innovation.